There are a lot of things business owners need to focus on right now when dealing with the implications of a global pandemic. Not only are the health and safety of staff and customers a priority, but theft remains a concern. As you already know, theft comes in many forms, money laundering included.
Jewelers specifically need to be cognizant of Anti-Money Laundering (AML) laws. Complying with these laws can be tricky for jewelers, but one thing is for sure: if you don’t, you could face serious penalties.
If you’re not familiar with the laws, who needs to comply with them, how to comply and what could happen if you’re not compliant, there is no better time to learn than now.
Learning isn’t the only thing you need to do, though — Anti-Money Laundering compliance for jewelers is required and needs to be reviewed on an annual basis.
What are Anti-Money Laundering laws?
The Financial Crimes Enforcement Network (FinCEN) defines money laundering as the process of making illegally gained proceeds appear legal.
To prevent “dirty money” attempting to be made “clean,” Anti-Money Laundering laws were initiated in the United States beginning with the Bank Secrecy Act of 1970.
These laws have not changed, but their scope has been broadened. Amendments made by the USA PATRIOT Act in 2001 include jewelers as part of the financial system because of the substantial value gems, jewelry and precious metals carry. The regulations cover certain goods, including precious metal, precious gems and jewels and jewelry made from those for which 50% of the value is derived from the precious metal/gems/jewels (“covered goods”).
Given the possibility that dirty money from illegal activities could be converted to clean money through trading jewelry, there are no signs these laws will be rolled back.
Why is AML compliance for jewelers important?
These laws are not necessarily in place because jewelers would behave unethically if they weren’t instituted, but because of the risk that criminals or terrorist organizations will target unsuspecting businesses.
These corrupt individuals and groups buy your legitimate covered goods to unload their “dirty” money and then sell or trade it to finance their unethical operations.
Jewelers already know how important it is to keep their merchandise protected from fraud, but this has larger implications than losing merchandise.
What happens if jewelry businesses are not compliant?
Generally, non-compliance would be uncovered during an IRS audit. Regulators could enact two different types of penalties for non-compliance:
- A civil penalty with a fine up to $250,000 or up to two times the amount of the transaction, not to exceed $1,000,000 A criminal penalty with a fine up to $500,000 and a maximum of 10 years in prison, or both
Of course, formal investigations and legal proceedings will be done before any charges are filed, but much like an employment lawsuit, you may find it difficult to keep a positive public image associated with your business during the process. Remember, even if you are unknowingly used to launder money, you can still be charged for being negligent.
How can jewelry businesses comply with AML laws?
If your business is not exempt, you are required to do the following:
- Appoint a compliance officer to manage your AML program Assess the risks your business faces Create a written, customized program Conduct ongoing employee training Check customers and suppliers for risk factors Appoint an independent tester to verify that your program is current, appropriate, and effective Have your program tested annually File appropriate federal forms when needed
If that sounds like a lot, you’re right — thankfully, you don’t have to guess where to start or how to go about creating your program without direction. In addition to offering exclusive discounts and insurance options for jewelers who ship their goods, Jewelers Mutual® Group, together with the Jewelers Vigilance Committee (JVC), the industry’s legal compliance experts, is offering a new and improved online AML program: JewelPAC™.
This program combines JVC’s expertise regarding legal issues impacting the jewelry industry with our trusted guidance. Some of the valuable features in the program include:
- Proprietary software that automatically creates customized documents that are required Ability to administer employee education and training Automatic updates that help keep your program up to date
The program helps ensure your supply chain is free of problematic activity out of your control that could harm your business.
In addition to being required by federal law and to maintain a relationship with your bank, a proven AML program also provides you peace of mind and pride with your customers knowing you are at the pinnacle of business ethics. Learn more about the JewelPAC program.
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